China’s new policy on rare earth mineral exports is causing concern that Japan will face another reduction in supplies of the valuable raw materials from that country in 2011.

Chinese authorities have announced their country will lower its ceiling on rare earth exports for the first half of this year by 35 percent from the same period last year. It appears likely that China will eventually impose tighter limits for the full year.

Japanese corporations must hasten to secure multiple sources of rare earth minerals ― most notably in Australia and the United States. Doing so is essential to ending the nation’s heavy reliance on China’s rare earth exports.

China accounts for more than 90 percent of the world’s output of rare earths, mineral resources indispensable to the manufacture of hybrid car motors and other high-tech products. Japanese industry uses about 30,000 tons of rare earths annually, and relies on Chinese exports to fill 90 percent of this demand.

In July 2010, the Chinese government announced a 40 percent lowering of its annual rare earth export ceiling from a year earlier. This was followed by Beijing’s decision to impose a ban on rare earth exports to Japan in the aftermath of collisions between a Chinese trawler and Japan Coast Guard patrol boats in waters off the Senkaku Islands in Okinawa Prefecture in September.

Later, China began the gradual resumption of rare earth exports to Japan ― but not to an extent that meets this nation’s demand.

The situation has been exacerbated by a large increase in China’s export tariff rate on the rare earth metal neodymium beginning this month. This may well be part of China’s strategy of cutting exports of domestic natural resources to keep them at home for its own purposes.

Rare earth prices are soaring in reaction to the widespread perception that such resources are in short supply due to cuts in Chinese exports. China’s restrictive export policy has dealt a dual blow to manufacturers in Japan and other nations. Today, industrial makers around the world are confronted with both a shortage of rare earth minerals and a sharp rise in their prices.

Every nation must know it will run afoul of global trade rules if it adopts protectionist trade measures to suit its own convenience. The United States had every reason to criticise China for its recent export policy and warn that Washington will not hesitate to bring the case before the World Trade Organisation if the situation cannot be corrected through bilateral talks.

Japan needs to cooperate with the United States and the European Union in persistently urging China to guarantee stable rare earth exports, a task essential for preventing that country’s export restrictions from adversely affecting world trade.

Japan must also take urgent steps on its own to secure a greater number of stable rare earth suppliers, instead of excessively relying on China for such resources.

The government deserves credit for its success in reaching agreements with several countries, including India, Vietnam, Mongolia and the United States, to cooperate in exploiting rare earth mines. Efforts should be expedited to develop such mines in foreign nations other than China.

Sojitz Corp., a major trading house, has signed a 10-year purchase contract with an Australian mining company. The contract will enable Sojitz to buy an amount of rare earth minerals equivalent to about 30 percent of Japan’s total annual demand. Meanwhile, Mitsubishi Corp. and Sumitomo Corp. are stepping up cooperative ties with resource-rich nations. We welcome all these moves.

It will be more and more important to develop rare earth substitutes while also making progress in recycling rare earths from used products and industrial scrap. Japanese corporations must reduce the risk of relying too heavily on China for not only rare earth but other natural resources as well.

(The Yomiuri Shimbun)

(Asia News Network)